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9/20/2010 9:50PM

Bank M&A: Leaving the Problems Behind

Loan write-downs remain a deterrent to bank M&A but, as the economy improves, buyers will be able to structure deals to leave credit quality problems with old shareholders, Rodgin Cohen of Sullivan & Cromwell tells Lisa Lee.

This transcript has been automatically generated and may not be 100% accurate.

... I ... oh ... delighted to be with you ... I think have they ... done ... enough to keep a consistent state ... they certainly have made for me ... considerably safer banking system ... will we ever get it perfectly safe the answer is no I'm not sure we want to get there anyway because of the end the threat to economic growth ... as with other Regenstrief on ... in any way and that is what being an ... at the margins it probably encourage his MNA ... bought for the most part the both the incentives and the disincentives are elsewhere or sacked as ... a purchase accounting in an environment where I loan portfolios ... are susceptible to last ... piece to explain how quaint printed page is the county ... is in having the Gemini and this time ... absolutely um ... when you have to fear value the loan book ... and you have an economic climate where loans would be written down ... if you try and Michigan by pure Value ... in order to buy a bank ... you not only be paid to shareholders that you have to replenish ... the capital ... which is lost as a result of purchase accounting ... over time that creeps back into income ... and as a result of transactions such as Wells Fargo's purchases will walk over you should provide an annuitize stream of income ... and a very substantial one ... that you have to be able to take the initial capital debt ... and a lot of cases that's not feasible ... so this will play out front they came in and tell things that happen ... absolutely right until we see the improvement in the overall economy there will continue to be a damper on him ... despite the fact that that unleashes Andalas ... up valuations are lower than its true but also the stocks of all cars are lower ... and it's a question of the relationship ... rather than the absolute level ... structuring of a pill change ... in this climate ... today we have seen it ... on ... very little in the way of structural changes because it has been no deals to structure of the man ... of the FDIC assisted deals were the IPIC template change from time to time ... but I think going forward we may see transactions where there is an attempt to isolate as much as possible the credit quality problems ... and leave those with the old shareholders have questioned the way to compete ... on ... perhaps the most interesting way proving there's ... maybe nothing new under the sun is out what was done in the nineteen eighties ... which the key is to get the shareholders of the target institution ... a security to value which can deteriorate perhaps almost to zero if the loan portfolio continues to deteriorate as well ... the ... choir is ... not in the top ... for five days to be able to buy into the billion to ten percent ... I think that ... I think they would be discouraged ... but ... some of these banks are very strong banks and they need the input of make a good pace particularly if it is set to land transaction ... and on ... the year for war after the deal remains very strongly capitalized ...